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Economics and John Maynard Keynes

 

            Keynesian economics is the macroeconomic School of Economic Thought that was based of the ideas of the 20th century economist John Maynard Keynes. Keynes, along with other economists of his time, saw an increasing number of flaws in the current economic thought. Keynes broke away from classical economics because of what he saw while he participated on the creation of the Treaty of Versailles in 1919. Keynes wrote about the experience the novel The Economic Consequence of Peace, where he argues against the reparations placed on Germany after the war. In the novel, Keynes predicts that the reparations would lead to Germany's financial collapse, which would in turn greatly affect Europe and the world1. Then in 1930's came the Great Depression. In response to the Great Depression, John Keynes wrote The General Theory of Employment, Interest, and Money that became the basis of Keynesian economics2. Keynesian economics believes that the free market concept is excellent but it has flaws. In his book, Keynes argues that the public sector should intervene in the private sector during times of economic trouble because they are not equipped to handle macroeconomic trends. Up until the Great Depression, problems in the economy were small and eventually work themselves out. This is the reason why people were so content with their laissez faire economic policy. However, once the Great Depression hit this policy became inadequate which gave rise to Keynesian economics. According to advocates of Keynesian economics, the public sector must actively rejuvenate the private sector during economic downturns such as a depression or recession. Another point this school of thought believes, is the idea that the economy is never and can never be at full employment. Keynesian economics marks the end of classical economics, which believed that the private sector could function on its own with no intervention from the government3.


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